A $1 increase in government spending will have a larger impact upon national income than a $1 cut in lump sum taxes, because:

Question

Quizplus · Accepted Answer

Not all of a tax cut is spent because individuals might save part of the tax cut instead of spending it, leading to a smaller multiplier effect on national income compared to direct government spending, where the entire amount is injected into the economy.

A $1 Increase in Government Spending Will Have a Larger